RBI levied the penalty under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) of the Banking Regulation Act, 1949 (the Act).
RBI said that this action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
RBI carried a statutory inspection of the bank concerning its financial position as of March 31, 2019, and the Risk Assessment Report (RAR) pertaining thereto revealed, inter alia, non-compliance with the aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why a penalty should not be imposed for failure to comply with the directions issued by RBI.
RBI said that after considering the bank’s replies to the notices, oral submissions made in the personal hearing and examination of additional submissions made by it, RBI came to the conclusion that the charges of non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty.
However, City Union Bank stock was unaffected on Friday. At around 3.18 PM, the bank was trading at Rs175 per piece up by 1.98% on Sense. The stock was near the day's high of Rs175.60 per piece.